What Does it Mean to be a Digital Company?

Nowadays all types of companies are looking to become digital companies rather than whatever they were before. In this journey, however, there is an interesting question that comes up on a regular basis: what does it really mean to be a digital company?

The simple and clearly mistaken answer is to assume that using digital solutions, such as email, websites, video conferencing, social media or even chatbots, would make you a digital company. Although all these solutions are based on IT infrastructure and software solutions, most would agree that using these does not make a digital company. In some of the organizations, digital as a subject, has been used as a marketing gimmick rather than addressing the core aspects of the matter.

Having smart mobile applications or fancy user portals doesn’t make a company digital either. Having a digital mindset is actually more cultural than using tools as it challenges people on their perceived strengths with which they have been running the team or department within the organization.

When reflecting on the question of what makes a company digital and, admittedly, looking around on the internet how others think about this, I identified five characteristics of digital companies and I’ll discuss those below.

First, digital companies use data-driven decision making rather than opinion-based decision making. Many of us have spent uncountable hours in meetings discussing the perceived advantages and disadvantages of certain alternatives, but the discussions were entirely based on the opinions of the participants that, though based on experience, frequently were not at all relevant to the situation at hand. Digital companies aim to make decisions based on data.

The second characteristic is concerned with relentless experimentation. As there are many situations where the data required for decision making is not readily available, the solution is to experiment with the alternatives that are considered with the intent of collecting the data required for data-driven decision making. Experimentation can be achieved by A/B/n testing, but also through quasi-experiments or more qualitative means such as simply trying things out in customer meetings.

Third, digital companies continuously strive for fast feedback loops. The time between taking a decision and having the data to determine the effect of a decision should be as short as possible. This facilitates data-driven decision making as I discussed in an earlier article.

Fourth, digital companies are very intentional about strategic data collection. The ambition to base decisions on data causes these companies to start to collect data concerning likely future decisions early on so that the required data is available when necessary. That doesn’t mean that digital companies collect all possible data, but these companies do collect lots of data.

The fifth characteristic is that digital companies focus on pervasive automation. Any task that is even remotely repetitive is a candidate for automation. The human talent in the company is directed to those tasks where human skills such as creativity, problem-solving, and initiative are required and everything else is, wherever possible, automated.

Anyone working in a software organization can claim they are “a digital company”, since they are characterized by these attributes “to an extent”. With that in mind, perhaps a more accurate question should be “How digital is your company?”. It’s not a binary situation, but rather a situation where a company is more or less digital. It is time to start working on the techniques to quantify the level of digitalization in a company.

Conclusion

To conclude, digital companies are highly agile with capabilities to enable self-managed teams to drive their own roadmap with minimum dependencies. Digital companies exhibit a set of characteristics that differentiate these companies from traditional companies. These characteristics touch the culture, norms, values and beliefs as well as the ways of working, i.e. the “soft” aspects, as much if not more as the “hard” aspects of the company, such as software, data and AI.

So, when going through the digital transformation and aspiring to become a digital company, make sure to focus on these characteristics as the more visible, hard evidence is actually a consequence and effect of these “soft” aspects and not the other way around.